Forbes CommunityVoice™ allows professional fee-based membership groups ("communities") to connect directly with the Forbes audience by enabling them to create content – and participate in the conversation – on the Forbes digital publishing platform. Each topic-based CommunityVoice™ is produced and managed by the group.

Opinions expressed within Forbes CommunityVoice™ are those of the participating individuals.

In the summer of 2007, just months after graduating from college, I was thrilled to be hired by Lehman Brothers, a top investment bank with 158 years of history. Less than a year into my employment, the economy slowed considerably. Americans were not able to pay back their home mortgages, which caused a collapse in home prices. In March of 2008, another top investment bank, Bear Stearns, was on the brink of collapse. They had significant exposure to these mortgages, which caused a massive liquidity crisis.

In a desperate attempt to keep a fraction of their value, The New York Times reported (paywall) that Bear Stearns agreed to sell to JPMorgan Chase for a paltry $2 per share (the stock peaked at $170 per share a year earlier). It was the first of many disgraceful events that put this country into the worst recession it had seen since the Great Depression.

The Monday after the Bear Stearns fiasco, Lehman Brothers announced its earnings. I will never, ever forget our then CFO assuring us that Lehman Brothers was going to survive. In her earnings call, she said we had the “leadership, the experience, the risk management discipline, the capital strengths, and certainly the liquidity to ride out the cycle.”

The call ended with a standing ovation on the trading floor and a general view from employees that we were going to be OK.

We were not OK. Just six months later, Lehman Brothers filed the largest bankruptcy in history. Thousands of jobs were lost, and billions of dollars reportedly vanished. I watched as my colleagues, my bosses and my friends lost most of their savings and retirement money.

A decade after the Great Recession that reportedly resulted in the loss of more than half of the value of the stock market (measured from October 11, 2007, to March 6, 2009), it is important to reflect on the lessons learned in its aftermath.

1. No single person, government or entity has the answers.

The economy is too vast and inefficient to be predicted accurately. For example, many Lehman employees apparently believed that the company had the answers to the future of Lehman Brothers. They were mistaken. Many Americans took out mortgages believing that the entities providing them were confident that they could pay them back but were left with high interest rates and low home valuations. Many relied on the government to govern the banks, but they were not properly overseen.

2.You can’t time the market.

The question that Wall Street insiders and investors focused on during the recession was “where is the bottom?” I believe we have continued to do the same in the past nine years by trying to figure out where the top is. As an investor, trying to figure out the bottom or the top can be a futile task, and instead, I recommend that investor focus should be on time spent in the market. We do know that, eventually, markets tend to recover. So the more time you spend in the market, the better your chances will be.

3. Diversification is key.

A well-diversified portfolio is your best defense against a volatile market. During the Great Recession, The Balance reports that the stock market lost over 50% of its value, but there were some areas of the market that did alright. Gold is a powerful hedge against global market instability, and Bureau of Labor Statistics data shows it performed very well during the recession.

A well-diversified portfolio would have still likely lost money during the great recession, but being well-diversified could have softened the fall.

4. Markets recover.

The hardest part of losing money in the market is staying invested through the worst of it. It takes discipline and faith that your portfolio will recover. During turbulent markets, I remind myself and my clients that I have never seen a dip, a crash or a recession in the history of the U.S. stock market that the market has not recovered from. There was a long recovery after the Great Depression, which spanned for over a decade (1929–1939) -- but in the end it was recovered. The market reportedly lost about 11% after the September 11th terrorist attacks and had recovered the entire amount within a month. Continuing with the Lehman Brothers example, just a few days after its collapse, the stock market recovered by about 13% (SPY dropped to $113.80 on September 18 and hit $128 by September 19th).

I still cringe when I see the Lehman Brothers logo. I learned too early in my career that investors have to be smarter and think harder than the organizations and governments that lead them. Markets cannot be timed, and I believe diversification is our best chance against market instability. Markets have recovered from pullbacks, recessions and even the Depression, but it requires time, patience and strength.

Disclaimer:

This article is informational only and is not suitable for everyone. It should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this article will come to pass. This article contains information derived from third party sources that we believe are reliable, but the author makes no representations with respect to accuracy or completeness. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. This article should not be regarded as a complete analysis of the subjects discussed. All information and expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change without notice.

Steel Peak Wealth Management, LLC (“Steel Peak”) is an SEC registered investment adviser in California. For additional information about Steel Peak, refer to the firm’s disclosure statement as set forth on Form ADV, available on the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).